How Much Could Your IRA Save You?

How much can you save on your taxes by making contributions to an IRA? You can save on your present taxes by deducting eligible contributions from your taxable income. By taking this deduction, you'll defer taxes by putting them off until you retire (when you'll most likely be in a lower income tax bracket). The chart below shows you how much you may be able to save now and each taxable year based on some contribution examples.

How Much Of Your IRA Contribution Is Deductible?

Certain limitations apply to the tax deductible status of IRA contributions for many wage owners.

However, the full deduction applies:

If you are not covered by an employer's qualified pension plan, or

If you are covered by such a plan, but your Adjusted Gross Income (AGI)
does not exceed $25,000 if filing singly, or $40,000 if married and filing jointly.

While you may need to invest more annually in order to reach your retirement goal, the federal government allows this group of individuals to contribute and take the full deduction for the amount contributed to their IRA up to $2,000. A working spouse can also contribute up to $2,000. A non-working spouse can contribute up to $250 per year. (You can also make non-deductible contributions to your account, which along with their earnings are subject to taxes.

A partial deduction applies for those wage earners covered by an employer's qualified pension plan with an AGI between:

$25,000 and $35,000 for Single taxpayers, or

$40,000 and $50,000 for Married taxpayers filing jointly.

For these groups of taxpayers, the chart below will quickly show you some examples of the portion of your IRA contribution that will be tax deductible.

This chart is ONLY for individual's COVERED
by an employer's qualified pension plan.